Slide 1

History of CARC and RARC Codes

In the past, insurance companies used their own internal messages or free-text explanations
when they denied or adjusted a healthcare claim. Because each payer used different wording,
providers and billing teams often found it difficult to understand the exact reason for a denial.
This created confusion, delays in payment, and inconsistent claim interpretation.

To solve this problem, standardized codes were introduced.

CARC (Claim Adjustment Reason Codes) were created under the Health Insurance Portability
and Accountability Act administrative simplification rules. Their main goal was to provide a
uniform way to explain why a claim payment was adjusted, denied, or reduced. These codes
are used in electronic remittance advice transactions such as the ANSI X12 835, which is the
standard format insurers use to send payment information to providers.

The maintenance and oversight of these codes are handled by the Centers for Medicare &
Medicaid Services (CMS), with support from industry standards organizations like Accredited
Standards Committee X12 and Workgroup for Electronic Data Interchange.

However, CARC codes alone sometimes explained the financial adjustment but not the full
reason behind it. To address this gap, RARC (Remittance Advice Remark Codes) were later
introduced. RARC codes provide additional clarification, such as missing documents, modifier
conflicts, medical necessity issues, or specific payer requirements.

The idea behind using both codes is separation of function:

 CARC explains the payment decision.

 RARC provides additional details and guidance for correction or appeal.

Today, CARC and RARC codes are widely used across Medicare, Medicaid, and commercial
insurance systems, forming an important part of electronic claim processing. They help billing
teams understand payer decisions quickly, correct errors, and manage claims more efficiently.

Why Medical Billers Need to Know CARC & RARC Codes

1. To Understand Claim Denials

When an insurance company processes a claim, they may pay fully, partially, or deny it. The
reason for this decision is explained using CARC and RARC codes.
Example:
A hospital bills $200 for a consultation, but the insurance pays only $150.
The ERA shows CARC CO-45, which means “Charge exceeds the allowed amount.”

This tells the biller that the insurance company only allows $150 for that service, so the extra $50
cannot be paid by the insurer.

2. To Correct and Resubmit Claims

Sometimes a claim is denied because of missing or incorrect information. By reading the codes,
the biller can fix the problem and resubmit the claim.

Example:
The ERA shows:

 CARC 16 – Claim lacks information

 RARC N290 – Missing provider taxonomy code

The biller understands that the provider’s taxonomy code was not included.
They correct the claim by adding the taxonomy code and resubmit it for payment.

3. To Decide Whether to Appeal

Sometimes a claim is denied even though the service was correct. In such cases, the biller may
need to appeal the claim.

Example:
The ERA shows:

 CARC 50 – Service not considered medically necessary

 RARC M86 – Service denied due to lack of medical documentation

The biller checks the patient record and finds the required clinical notes.
They submit those notes with an appeal, requesting the insurer to reconsider the claim.

4. To Post Payments Accurately

Medical billers must record payments correctly in the billing system. CARC and RARC codes
help them understand adjustments.

Example:
A claim billed $300, but the insurance pays $220.
The ERA shows CARC CO-45 (contractual adjustment).
The biller records:

 Insurance payment: $220

 Contractual adjustment: $80

This ensures the accounts are balanced correctly.

5. To Reduce Future Claim Errors

If billers see the same denial codes repeatedly, they can identify a pattern and fix the root
problem.

Example:
If many claims show CARC 29 – Timely filing limit exceeded, it means claims are being
submitted late.
The billing team can change their workflow to submit claims earlier and avoid future denials.

Slide

Healthcare providers use a complex system of CARC RARC codes every day.
The industry currently employs 1,185 RARCs and 358 CARCs

Here is a clear explanation you can use when presenting the slide.

Explanation: What is a CARC?

Claim Adjustment Reason Codes (CARCs) are standardized codes used in medical billing to
explain why a claim payment was reduced, denied, or adjusted by an insurance company.
They help healthcare providers and insurance payers communicate clearly during the claims
process.

The term CARC stands for Claim Adjustment Reason Code. These codes are used when a
claim does not get paid exactly as billed. They explain the reason behind the change in payment.
For example, the adjustment might happen because of contractual agreements between the
provider and insurer, patient responsibility, duplicate billing, or policy rules.

CARC codes became mandatory after the administrative simplification rules under the Health
Insurance Portability and Accountability Act (HIPAA). Their purpose was to create a uniform
and standardized way to explain claim decisions in electronic healthcare transactions. The
codes are maintained by the Accredited Standards Committee X12, which develops standards for
electronic data exchange in healthcare.
You can usually find CARC codes in two important documents sent by insurance companies:

 Electronic Remittance Advice (ERA)

 Explanation of Benefits (EOB)

Each CARC code has two parts. The first part is a group code made of two letters, which
indicates the general category of the adjustment. The second part is a numeric code, which
provides the specific reason for the adjustment.

Some common group codes include:

 CO (Contractual Obligation): Adjustments based on the agreement between the

provider and the insurance company.
 PR (Patient Responsibility): The portion of the bill that the patient must pay, such as
deductibles or co-payments.
 OA (Other Adjustment): Used for adjustments that do not fall into other categories.
 PI (Payer Initiated Reduction): Reductions made by the insurance payer according to
their policies.
 CR (Correction and Reversal): Used when correcting a previous claim adjustment.

For example:

 CO-45 means the charge exceeds the allowed fee schedule or contracted rate. If a
provider bills $200 for a service but the insurance contract allows only $150, the insurer
will pay $150 and adjust the remaining $50 using this code.
 CO-97 means the service is already included in the payment for another procedure.
For instance, if a surgical package includes pre-operative services, those services may not
be paid separately.

CARC codes are important because they help medical billers understand exactly what
happened to a claim. By interpreting these codes correctly, billers can decide whether the claim
needs correction, resubmission, appeal, or patient billing.

In short, CARC codes provide clarity and standardization in the medical billing process,
making it easier for healthcare providers to manage claim payments and resolve issues
efficiently.

Slide

Let’s explain each CARC code with a simple real-life medical billing example so it becomes
easy to understand.
1. CO-18 – Duplicate Claim/Service

Meaning:
The insurance company received the same claim more than once. Since it has already been
processed, the second claim is rejected.

Example:
A clinic submits a claim for a blood test costing $100.

 The claim is already processed and paid.

 Due to a system error, the clinic submits the same claim again.

Insurance response:
CARC CO-18 – Duplicate claim/service

➡ Action: The biller should check the records and avoid resubmitting the same claim again.

2. CO-22 – Coordination of Benefits (COB)

Meaning:
The patient has more than one insurance plan, and another insurer may be responsible for
payment.

Example:
A patient has:

 Primary insurance: Employer plan

 Secondary insurance: Spouse’s insurance

A claim of $500 for surgery is sent to the secondary insurance first.

Insurance response:
CARC CO-22 – Another payer may be responsible

➡ Action: The biller must submit the claim to the primary insurance first.

3. CO-26 – Expenses Before Coverage Began

Meaning:
The service was provided before the patient's insurance coverage started.

Example:
Insurance start date: March 1
Doctor visit: February 20

The clinic bills $150 for consultation.

Insurance response:
CARC CO-26 – Service provided before coverage became active

➡ Action: The patient may need to pay the bill, or the claim may be resubmitted to another
payer if available.

4. CO-50 – Service Not Medically Necessary

Meaning:
The insurance company believes the treatment was not medically necessary based on their
clinical guidelines.

Example:
A doctor orders an MRI scan for mild headache without strong medical indication.

Insurance response:
CARC CO-50 – Service not medically necessary

➡ Action:
The provider may submit medical records or clinical notes to justify the test and appeal the
denial.

5. CO-96 – Non-Covered Charges

Meaning:
The service is not included in the patient’s insurance coverage.

Example:
A patient receives a cosmetic skin procedure costing $400.

The insurance policy does not cover cosmetic treatments.

Insurance response:
CARC CO-96 – Non-covered service

➡ Action: The amount is usually billed directly to the patient.

✅ Simple Tip for Medical Billers

Code What It Means What to Do

CO-18 Duplicate claim Check records, don’t resubmit

CO-22 Another insurance responsible Send to correct payer

CO-26 Service before coverage Bill patient or other payer

CO-50 Not medically necessary Provide documentation or appeal

CO-96 Not covered by insurance Bill patient

If you want, I can also show you the 10 most common CARC codes medical billers see in real
practice, which may help your medical billing learning or presentation.

SlIDE

RARC (Remittance Advice Remark Code) is a code used in medical billing to give extra
information about a claim adjustment or denial. It usually works together with CARC
(Claim Adjustment Reason Code).

While CARC explains the main reason why the payment changed, RARC provides more
details about that reason or gives instructions on what the provider should do next.

For example, if a claim is denied, the CARC might say that information is missing, but the
RARC will explain what exactly is missing.

History of RARC

RARCs were first created by Medicare to give additional explanations for claim processing.
Later, they became a standard across the healthcare industry under the Health Insurance
Portability and Accountability Act (HIPAA).

Today, almost all insurance companies use RARC codes to provide clear communication to
healthcare providers and medical billers.

Types of RARC

RARCs are generally divided into two types.

1. Supplemental RARC

These codes give extra explanation about a claim adjustment that has already been
identified by a CARC.

They usually tell the provider what information is missing or what needs to be corrected.

Example:

 CARC 16 – Claim lacks information

 RARC M31 – Missing radiology report

In this situation:

 CARC tells the main problem: information is missing

 RARC specifies the exact problem: the radiology report is missing

Another example:

 RARC M20 – Missing or invalid HCPCS code

This tells the biller that the procedure code was not entered correctly.

2. Informational RARC

These codes provide general information or alerts rather than explaining a payment
adjustment.

They usually begin with the word “Alert.”

Example:

 RARC M17 – Payment approved because the provider could not reasonably know that
the service would not normally be covered.

What this means

Insurance is saying:

"We paid this time, but normally this service may not be covered."

This code does not indicate a denial but simply gives additional information about the
payment decision.
How RARC Works with CARC

In claim processing:

1. CARC appears first and explains the main reason for the payment adjustment or denial.
2. RARC may appear next to provide more detailed explanation or instructions.

Not all claims will have RARC codes, but every adjusted claim will have a CARC code.

Slide

Let’s understand each RARC code with simple examples so you can see what the problem is
and what the biller should do next.

1. M51 – Missing, Incomplete, or Invalid Procedure Code

Meaning:
The procedure code entered in the claim is missing, incomplete, or incorrect.

Example:
A clinic performs an X-ray but submits the claim without a valid CPT/HCPCS procedure
code.

Insurance response:
RARC M51 – Missing or invalid procedure code

What the biller should do:

• Check the correct procedure code (for example the proper CPT code).
• Correct the code and resubmit the claim.

2. N290 – Missing or Invalid Provider Credentials

Meaning:
The claim has incorrect or missing provider details, such as NPI, taxonomy code, or license
information.
Example:
A doctor provides a consultation, but the claim is submitted without the correct NPI number.

Insurance response:
RARC N290 – Missing or invalid provider credentials

What the biller should do:

• Verify the provider’s NPI, taxonomy code, or license number.
• Correct the information and resubmit the claim.

3. N345 – Incorrect Claim Form or Submission Format

Meaning:
The claim was submitted using the wrong claim form or incorrect format required by the
payer.

Example:
A hospital service should be submitted using a UB-04 claim form, but the biller submits it using
a CMS-1500 form.

Insurance response:
RARC N345 – Incorrect claim form or format

What the biller should do:

• Use the correct claim form required by the payer.
• Follow the payer’s formatting guidelines and resubmit the claim.

4. N522 – Duplicate Claim Submitted

Meaning:
The same claim has been submitted more than once.

Example:
A clinic submits a $200 consultation claim.
Because payment was delayed, the biller sends the same claim again.

Insurance response:
RARC N522 – Duplicate claim submitted

What the biller should do:

• Check the billing history to confirm whether the claim was already submitted.
• Avoid sending duplicate claims.
Simple Summary
RARC Code Problem Action

M51 Invalid or missing procedure code Correct the procedure code

N290 Provider information missing Verify NPI or credentials

N345 Wrong claim form Submit using correct format

N522 Duplicate claim Check billing records

✅ Simple way to remember:

RARC codes usually tell the biller what exactly needs to be corrected before resubmitting
the claim.

Slide

Here is a clear explanation of the slide, step by step.

Explanation: How to Use CARC and RARC Codes Effectively

To use CARC and RARC codes properly, medical billing teams need a structured approach so
they can quickly understand claim issues and take the right action.

1. Keep the code lists updated

CARC and RARC codes are not fixed forever. They are updated periodically by organizations
such as the Centers for Medicare & Medicaid Services (CMS).

New healthcare policies and billing situations may require new codes. Therefore, billing systems
and staff must always use the latest code lists to avoid confusion or incorrect interpretation.

2. Monitor denial trends

Medical billing teams should regularly review reports that show which CARC and RARC
codes appear most often in denied claims.

For example:
If many claims show CARC 16 – Missing information, it means that documentation is often
incomplete.
By identifying this pattern, the clinic can improve documentation before submitting claims. This
helps reduce future denials and delays in payment.

3. Train billing professionals

Medical billers must understand how to interpret these codes correctly.

If billers know what the codes mean, they can quickly decide whether they should:

 Correct the claim

 Add missing documentation
 Resubmit the claim
 Appeal the denial

Proper training improves efficiency and reduces mistakes in the billing process.

4. Use EHR or billing software features

Many Electronic Health Record (EHR) systems and billing software automatically capture
CARC and RARC codes from the Electronic Remittance Advice (ERA) sent by insurance
companies.

This automation helps by:

 Reducing manual data entry

 Preventing coding errors
 Making claim tracking easier

As a result, the claims process becomes faster and more accurate.

5. Contact the payer when necessary

Sometimes the reason for denial may still be unclear even after reviewing the CARC and RARC
codes.

In such situations, the billing team can contact the insurance company (payer) to request
clarification. This helps resolve disputes quickly and ensures the correct action is taken.

6. Use the codes when resubmitting or appealing a claim

When correcting or appealing a denied claim, it is important to mention the CARC and RARC
codes in the appeal letter or resubmission.
For example:
If the denial shows

 CARC 16 – Missing information

 RARC M31 – Missing radiology report

The biller should attach the radiology report and reference these codes when resubmitting the
claim.

This helps the insurer quickly understand what was corrected.

Why RARCs are not always present

Every adjusted claim has at least one CARC, but RARCs don't always show
up. This happens because CARCs give basic explanations that work
everywhere. RARCs add extra details only when needed.

Simple claim adjustments like routine contract changes don't need more
explanation than the CARC. The CARC message is often clear enough by
itself, and adding a RARC would just repeat information.

Notwithstanding that, complex denials usually have both types of codes. This
ensures providers get all the information they need for fixes or appeals. That's
why you'll always see CARCs on remittance advice, but RARCs only show up
sometimes.

[Link]

[Link]

Denial
Reason Explanation How to Address It
Code
Diagnosis code does not Use the most specific ICD diagnosis
Diagnosis Not match the procedure or is code and ensure documentation
CO-11
Specific not specific enough to supports the treatment. Train staff on
justify treatment. updated coding guidelines.
Verify insurance coverage before the
Authorization / Service was provided
service and obtain pre-authorization
CO-15 Pre-Certification without prior approval from
when required. Train front desk staff to
Missing the insurance company.
check this during patient registration.
Claim does not contain
Use a claim submission checklist and
Claim Lacks enough details for the
CO-16 electronic tools to identify missing
Information insurer to make a payment
information before submitting claims.
decision.
Denial
Reason Explanation How to Address It
Code
The same claim was
Use billing software with duplicate
submitted more than once
CO-18 Duplicate Claim claim detection and ensure staff check
for the same patient and
claim history before resubmission.
service.
Track claim submission timelines and
The claim was submitted
Timely Filing automate reminders to ensure claims
CO-29 after the payer’s allowed
Limit Exceeded are submitted within the allowed
submission deadline.
period.
The service, equipment, or Verify coverage before providing the
Service Not
CO-204 drug is not covered under service and inform patients about non-
Covered
the patient’s insurance plan. covered services in advance.
Cannot be prevented. Focus on
Medicare Mandatory reduction in
accurate claim submissions and
CO-253 Sequestration Medicare payments due to
account for this reduction in financial
Adjustment federal budget policies.
planning.
The patient has already used
Lifetime Benefit Verify benefit limits during patient
the maximum benefit
CO-167 Maximum registration and discuss alternative
allowed for that service
Reached payment options if limits are reached.
under their insurance plan.
Another insurance payer Verify all insurance policies and
Coordination of
CO-22 may be responsible for submit the claim to the primary payer
Benefits
payment. first.
Payment for the service is Check bundling rules before billing
CO-97 Bundled Service already included in another and avoid billing services separately if
procedure payment. they are part of a procedure package.

Below is a clear explanation with simple real-life examples for each common denial code.
This will help you understand why the denial happens and what action the biller should take.

1. CO-11 – Diagnosis Not Specific

Meaning:
The diagnosis code submitted does not clearly justify the procedure or treatment.

Example:
A doctor orders a CT scan of the chest.

Diagnosis submitted: R07.9 – Chest pain, unspecified

Insurance may deny because the diagnosis is too vague or does not justify a CT scan.
What to do:
Use a more specific diagnosis code if supported by documentation (for example, suspected
pulmonary embolism or another detailed diagnosis).

2. CO-15 – Authorization / Pre-Certification Missing

Meaning:
The service required prior approval from the insurance company, but it was not obtained.

Example:
A patient undergoes an MRI scan costing $800.

The insurance plan requires pre-authorization for MRI scans, but the clinic did not request it
before the test.

Insurance response: CO-15

What to do:
Verify insurance and obtain authorization before performing the service.

3. CO-16 – Claim Lacks Information

Meaning:
The claim does not contain enough details for the insurance company to process it.

Example:
A claim for surgery is submitted without:

• procedure modifier
• provider NPI
• required documentation

Insurance response: CO-16

What to do:
Review the claim, add missing information, and resubmit the claim.
4. CO-18 – Duplicate Claim
Meaning:
The same claim has already been submitted and processed.

Example:
A clinic submits a claim for a $150 consultation.

Because payment has not arrived yet, the biller submits the same claim again.

Insurance response: CO-18

What to do:
Check the billing system before resubmitting to avoid duplicate claims.

5. CO-29 – Timely Filing Limit Exceeded

Meaning:
The claim was submitted after the allowed time limit set by the insurer.

Example:

Insurance rule: claims must be submitted within 90 days.

Patient visit: January 1

Claim submitted: May 15

Insurance response: CO-29

What to do:
Submit claims within the payer’s filing deadline.

6. CO-204 – Service Not Covered

Meaning:
The patient’s insurance plan does not cover the service provided.

Example:
A patient receives a cosmetic dermatology treatment costing $500.

The insurance plan covers only medically necessary treatments, not cosmetic procedures.
Insurance response: CO-204

What to do:
Verify coverage before the service and inform the patient if the service is not covered.

7. CO-253 – Medicare Sequestration Adjustment

Meaning:
Medicare payments are reduced due to government budget rules.

This is not a mistake in the claim.

Example:
Claim amount approved: $1000

Medicare automatically reduces payment by a small percentage due to sequestration.

Insurance response: CO-253

What to do:
Nothing needs correction. This reduction is automatic and unavoidable.

8. CO-167 – Lifetime Benefit Maximum Reached

Meaning:
The patient has already used the maximum insurance benefit allowed for that treatment.

Example:
Insurance policy covers 20 physiotherapy sessions per year.

The patient has already completed 20 sessions.

Session number 21 is billed.

Insurance response: CO-167

What to do:
Inform the patient that insurance benefits are exhausted and discuss other payment options.
9. CO-22 – Coordination of Benefits
Meaning:
The patient has multiple insurance plans, and another payer may be responsible.

Example:

Patient has:

• Primary insurance from employer

• Secondary insurance from spouse

The clinic sends the claim directly to the secondary insurance.

Insurance response: CO-22

What to do:
Submit the claim first to the primary insurance.

10. CO-97 – Bundled Service

Meaning:
The service is already included in the payment for another procedure.

Example:
A patient undergoes surgery.

The surgery package already includes:

• pre-operative evaluation
• post-operative care

If the provider bills these services separately, insurance will deny them.

Insurance response: CO-97

What to do:
Follow bundling rules and do not bill separately for services already included in the procedure
package.
Simple Summary
Code Main Issue

CO-11 Diagnosis not specific

CO-15 Authorization missing

CO-16 Claim missing information

CO-18 Duplicate claim

CO-29 Filing deadline missed

CO-204 Service not covered

CO-253 Medicare payment reduction

CO-167 Benefit limit reached

CO-22 Another insurance responsible

CO-97 Service bundled with another procedure

If you want, I can also show you the 5 denial codes that cause 70% of medical billing
rejections in real practice, which will make this topic much easier to remember.